Service Tax on Construction of Residential Apartments

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This query is : Resolved

Rasesh (Querist)

14 August 2010 Suppose a builder wants to collect and pay service tax, which the best scheme available to him.

1) 75% abatement
2) 67% abatement
3) 4.12% WCT (whether available to him)
4) 10.30% only on Labour (whether available to him)

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

14 August 2010 All the schemes are having own limitations and advantage

option 1 & 2- you may not claim cenvat input

option 3 - you can avail cenvat, but threre is no segragation of material and labour, total contract value will be the taxable.

Option 4- Manitenance of invoice separately labour and mateirals and cenvat input also available

Rasesh

Rasesh (Querist)

14 August 2010 I agree on all the above.

Please clarify whether option 3 and option 4 are available to a builder selling residential apartments.

There is one view that since the entire tower is sold under different apartments, option 3 and 4 are not available to a builder.

Vipin Gupta

Vipin Gupta (Expert)

14 August 2010 Dear Sir,

Since the builders get themselves registered under the work contract under the Existing VAT so they can definately take the benefit of 4.12 % Tax

Rasesh

Rasesh (Querist)

16 August 2010 Correct me if I am wrong. The final understanding is as under:

1) Builder gets himself registered under work contract under existing VAT and takes benefit of 4.12% scheme

2) The apatments are sold before getting Completion certificate.

3) Builder pays Service Tax under the 4.12% and offsets it against input credit for services and capital goods (not for input goods).

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